Real Estate: Get A Foot On The Property Ladder Now And Build For The Future

Ashley Brown advises young professionals on why and how soon to start investing in real estate

GRADUATING from university or college is a time to toss the mortar board high into the air, celebrate the last of endless courses, papers and pressure.

But as you leave one world, you enter another. As well as the new world being defined as one of settling down, I believe it is also one of unparalleled opportunity to begin investing.

That is because, even though your resources may be limited, so are your other responsibilities and financial obligations. In fact, there may never be another time when you are more financially free to decide how best to spend whatever income you earn. No mortgage, no school fees, perhaps not even health insurance to worry about yet.

So what is the reality when you begin to consider investing? For some, post-graduation may signal the start of finding your first real job. For many Bahamians who were studying abroad, it may mean coming home to Nassau or elsewhere in the Bahamas and, after years of freedom, moving back in with parents. In Bahamian society, it’s not uncommon for graduates to live at home until marriage or alternative significant other arrangement.

In past years, living at home might have been sparked by a desire to save cash. In today’s market, I suggest that it’s all about investing the money that you save.

There are challenges to consider. You are new to investment. Do you delve into the domestic capital market, buying shares in a bank or other publicly-traded Bahamian company? Or do you choose property - vacant land, a starter home, duplex, condominium, commercial property? Do you buy or build? How do you go about getting a mortgage with a limited employment history?

The first step is to set an investment goal. The domestic capital market has performed well but consider this: real estate has been the path to wealth for nearly every prominent Bahamian family regardless of that family’s roots.

Experts and specialists at leading real estate firm Mario Carey Realty are providing advice aimed at helping buyers, sellers, renters and those who want to build their dream home navigate the world of residential and commercial real estate in a weekly series of articles in The Tribune.

Renting makes sense if you are posted in a place for a set period and know you are moving on or if you want to explore a certain community or island before building or buying. But, long term, it may not be the best use of your funds. Ownership can mean achieving equity, a healthy return on investment and benefits for you that you will never be able to achieve through rental.

Once you set a goal of ownership, select an agent licenced by the Bahamas Real Estate Association (BREA) who cares about the young professional and sees your potential. Chances are that agent also will be a young professional who relates to what you are going through. You will benefit from their knowledge of reasonably priced or underpriced properties coming onto the market or a listing that has sat for a long time and may be reduced and in your price range.

The good agent will also help you “shop” for best mortgage rates. Yes, there is a lot to consider: the full costs of closing, real property tax, 7.5 per cent Value Added Tax (VAT) on goods and services, maintenance expenses. But being young is not a reason to avoid purchasing. Getting a head start in investing does for your financial circumstances what getting an education did for your professional career.

To accomplish the goal of purchasing real estate, you need funds. Create a strict saving schedule. Decide on an amount that you can comfortably put aside in a special savings account designated solely for property during your pay period. Stick to the schedule, no matter what. You will be surprised to know how much you can save with a little discipline

Once you have enough for your down payment, you will be ready to build. Remember, real estate can also be seen as a fixed and tangible asset that can be improved, bought, rented and sold, especially in a buyers’ market like the Bahamas. The “Time Value of Money”, typically spoken in laymen’s terms as inflation of and the power of the dollar, is an important concept to consider. That means, over time, the price tag of your property at the initial time of purchase will most likely appreciate in value. So although it may seem like a major sacrifice now to meet the mortgage payment, in time the possibility of a good return on your investment is very likely.

If you truly want to maximise the return on investment and you don’t mind staying in the family home or other residence with low or no rent, you may choose to use your new home, condo or townhome to generate income. You can rent your property and create a passive income for yourself. If rental revenue equals or exceeds the mortgage payment, the investment will pay for itself and you may not even have to dip into your salary or professional earnings. Later, should you choose to move abroad, that property may still generate revenue. And the residence that you built as a 20-something can become a great income-producer for your retirement, allowing a relatively even flow of income.

Property has long held the promise and the reality of financial growth and success for Bahamians. In an island nation where demand exceeds supply, especially for prime property, real estate is a very sound bet and there is no age too young to increase your chance of reaping the benefits.